2022 (3) TMI 433 - AT - Income Tax

Appeal granted: Physical possession date key for tax deduction under Income Tax Act Section 54

Reji Easow Versus Income Tax Officer, Ward 3 (5) Thane

Reji Easow Versus Income Tax Officer, Ward 3 (5) Thane - TMI Issues:Challenge to disallowance of deduction under Section 54 of the Income Tax Act.Analysis:1. The Appellant, a salaried employee, challenged the order of the Commissioner of Income Tax (Appeals) denying deduction under Section 54 of the Income Tax Act. The dispute arose from the purchase of a new residential property and the sale of the original asset. The Assessing Officer contended that the new property was purchased outside the specified period, thus disallowing the deduction. The Appellant argued that the date of actual physical possession should be considered the date of purchase, entitling them to the benefit under Section 54.2. The Commissioner of Income Tax (Appeals) upheld the denial of the deduction, considering the date of registration of the Agreement for Sale as the date of purchase. The Appellant further contended that the transaction should be treated as a case of 'construction' rather than 'purchase,' citing completion of construction and possession within the specified period. The Appellant relied on judicial precedents to support their claim, while the Departmental Representative supported the Assessing Officer's decision based on the registration date of the agreement and the actual purchase of the property.3. The Tribunal analyzed the agreement terms and relevant legal provisions to determine the nature of the transaction. The agreement for sale was subject to the Maharashtra Ownership Flats Act, and possession was granted to the purchaser as a licensee. Referring to judicial precedents, the Tribunal held that the date of taking possession should be considered the date of purchase for Section 54 purposes, regardless of the source of funds used. The Tribunal emphasized that the funds from the sale of the original asset need not be utilized for the new purchase to qualify for the deduction under Section 54.4. Consequently, the Tribunal allowed the appeal, considering the date of actual physical possession as the date of purchase, falling within the specified period under Section 54. The Tribunal deemed the Appellant entitled to the benefit under Section 54 of the Income Tax Act, rendering the alternative argument regarding 'construction' unnecessary based on the established legal principles and precedents.This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal regarding the deduction under Section 54 of the Income Tax Act.